Airline sector retreats as oil climbs

AugustCole

SAN FRANCISCO (MarketWatch) -- The airline sector closed lower Thursday with legacy carriers and low-cost operators alike in the red after a three-week high for oil prices overshadowed the latest February operating reports from Continental Airlines, American Airlines, AirTran Airways and Southwest Airlines.

None of the components in the 10-stock Amex Airline Index ($XAL) advanced, leaving the index down 1.3% to 53.24 points. Oil prices continued to climb this week, renewing concerns about energy prices within the airline industry and within the economy at large. Crude futures prices topped $63 a barrel in New York trading. See Futures Movers.

As of Feb. 28, an average of U.S. jet fuel spot prices puts a barrel about $15 a barrel above the cost of a barrel of West Texas Intermediate crude oil, according to the Air Transport Association. That's the widest "crack spread" so far this year.

Continental Airlines
CAL, +5.04%
fell 0.9% to $23.85 after reporting 13% higher February traffic than a year ago and a 2.1 percentage point increase in load factor a record for the month at 76%. Capacity increased by approximately 10% during the month.

Passenger revenue per available seat mile, an important measure of pricing power, rose by 8% to 9% during the month, Continental said.

AirTran Holdings
AAI, +0.00%
said that AirTran Airways' traffic in February rose 26% to a record for the month as capacity increased by almost 23%. Load factor rose 1.8 percentage points to 70%.

"Our rating increase is based on expected modest capacity reductions by Delta Air Lines in crucial JetBlue markets, continuing strong travel demand, seasonality, leading to expected price increases," wrote Calyon analyst Ray Neidl in a research note.

He now expects the company to lose 17 cents a share in 2006, a narrower loss than his earlier 27-cent estimate. Neidl expects JetBlue to report a profit of 27 cents a share next year.

Southwest Airlines
LUV, +0.42%
reported a 17% increase in traffic over the year-ago period and a 5.2 percentage point increase in load factor to 68.5%. Capacity was 8.5% higher in the month.

Northwest Airlines
NWACQ
continues to talk Thursday with its pilots union about a new labor contract that will help the bankrupt carrier meet its goal of cutting some $1.4 billion a year in annual labor expenses. See full story.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.